Thus, the bottom line net profit or loss reported on your income statement is directly effected by the matching principle. The accounting income liability factors that can weigh in on the expense side are investment fees, fiduciary fees, state taxes, federal taxes, real estate taxes, and property taxes. Depreciation is an attempt to allocate the cost of a non-current asset to each accounting period that the asset is used to generate income or earnings. When a non-current asset is purchased during the year, depreciation is calculated to the nearest month. On January 1, 2000 John Kay Limited purchased plant for ¢250,000,000. On January 1, 2000 Hyde Limited purchased a motor vehicle for ¢250,000,000. In some organisations, a full year’s depreciation charge is provided on noncurrent assets acquired during the year irrespective of the period in which they were purchased. Manufacturing firms include depreciation of plant and machinery or factory building in the cost of goods produced.

It is the policy of John Kay to depreciate Plant at 20%. You are required to calculate the net book value as at the end of 2004 accounting period using the reducing balance method. Under this method of depreciation, the book value of a non-current asset at the beginning of the year is multiplied by a fixed percentage to determine the depreciation for the accounting year. The corresponding credit is the provision for depreciation, a contra non-current assets account that reduces gross assets to net book value. You must note that the Provision for Depreciation account does not represent cash set aside for replacement of non-current assets; nor does its recognition imply the creation of reserves for asset replacement. Depreciation expense could be classified as a selling or administrative expense, depending on the assets function. Assets such as patent, copyrights, finance leases have a legal life fixed in terms of years. Common specializations for those who study finance at degree level include corporate finance, financial evaluation, behavioral finance, derivatives, capital markets, econometrics, financial modeling, quantitative finance, investment management, financial regulation, financial reporting, and even some aspects of accounting.

In the field of finance, accuracy, reliability and time management is given so much importance. 14 billion of assets at Axis Asset Management Co. isn’t convinced there’s value in small caps. Accounting management was manual when there were no software applications in the commerce industry. It offers discounts to new customers to save some money when they purchase a license of the accounting software. Warehouse accounting can be almost completely automated with the right software. You many have heard about investors being defrauded or accounting fraud. If you want to make a new tradition for your children you can have them receive a call from Santa Claus. If you make payments through cheques, a system that offers cheque processing features will save you a lot of time. You will learn why statutory deductions like social security contributions are made and how they are calculated. There are several methods of calculating depreciation.

Depreciation may be calculated simply by deducting the amount receivable when the asset is either sold or put out of use by the business from the cost of the non-current asset. Every business organization needs to safeguard its employee’s interests and the company’s reputation at any cost. Depreciation recognition transfers a portion of acquisition cost and capitalised post-acquisition cost of non-current to an expense account called depreciation expense. As a result of the subjective nature of the depreciation computation, GNAS 10 requires that the estimates that are used in the depreciation calculation should be kept under constant review and, where appropriate, revised. Natural resources such as mines, quarries, oil, coal and gas deposits become worthless when the deposits or resources are depleted. Natural occurrences such as erosion, rust and decay will certainly reduce the value of any non-current asset. The invention of gas-molded oven will certainly render the former out of date.